Good morning and welcome to the 13th meeting in 2017 of the Culture, Tourism, Europe and External Relations Committee. I remind members and the public to turn off mobile phones, and any members who are using electronic devices to access committee papers during the meeting should ensure that they are switched to silent. Apologies have been received from Jackson Carlaw and Stuart McMillan. However, I welcome Kate Forbes as Stuart’s substitute and Margaret Mitchell as Jackson’s substitute, and I invite them to declare any relevant interests.

The next item of business is a round-table evidence session to obtain an overview of the current state of the Scottish tourism sector. I welcome the witnesses and invite them—and members—to introduce themselves. We will go round the table.

As I have said, this session is intended as an overview of the sector to inform the committee’s scrutiny work. In many ways, this seems to be a good time for Scottish tourism. Statistics that came out this morning show that the number of overseas visitors grew by 6 per cent last year. Of course, there is a great deal of ambition for the sector; for example, the tourism 2020 strategy has the very ambitious aim of growing revenue from the industry by £1 billion by 2020. That is part of the Scottish Government’s strategy. In the light of that continuing success and the ambition for further success, where is the industry at the moment and what are the main challenges and opportunities?

Obviously, VisitScotland is delighted with the figures that were announced this morning, particularly the increase in overseas visitors and the 9 per cent increase in visitor spend that goes with that. Over the past several years, there has been a significant increase in direct flights coming to Scotland, which has hugely improved our international competitiveness. By and large, the industry is in really good health. We have some forward figures for the year ahead that suggest that bookings are looking strong, and we had a good year last year. Flight details that came out from Flybe last week showed a significant increase in forward bookings, particularly for flights to the Highlands and Islands airports. In general, in terms of activity and visitor throughput, the situation is positive.

Just a couple of weeks ago at our expo event, we published our visitor survey, which contained encouraging figures. The survey was of people who had been in Scotland, and they talked positively about their experience right across the piece, on geography and their experience more generally.

VisitScotland’s marketing is going well. Last year, we launched our ScotSpirit campaign to great acclaim and with support from the industry, and it has been hugely successful. We have done much more digital marketing than ever before, and that enables us to measure the impact that we have much more effectively than before.

In general, the figures are encouraging, although we are not complacent and we recognise that the industry faces significant challenges. I suspect that my colleagues round the table can articulate more clearly than I can the particular challenges facing their parts of the industry.

I will respond from the Scottish Tourism Alliance perspective and from the perspective of our role as co-ordinators of the national tourism strategy, which is my specific role. The strategy, which was launched in 2012, runs to 2020, and the mid-term review that we did last year found extraordinary levels of collaboration in what is a broad and disparate sector. We have seen a massive step change over the past few years.

On the figures, we still have quite a long way to go if we are to reach our £1 billion target. Certainly, we have had successes with campaigns such as ScotSpirit and through the huge amount of work that the industry is doing to align and collaborate. We are getting clarity on what the strategic priorities need to be, and those came through strongly in the mid-term review. They are to do with leadership; the need for digital to influence investment to ensure that the country is ready and fit to grow tourism; and the quality of the visitor experience. The evidence from the visitor survey two weeks ago showed that the quality is rising.

On some of the key issues, Riddell Graham is correct that there is real optimism and that last year seems to have been a successful year. However, there is growing concern in the industry about rising costs. Although visitor spend might be increasing, we at the STA hear more and more from businesses that their profits or margins are being squeezed by rising regulation and costs. I am sure that my colleagues round the table will have examples of that.

It is a good news story. Tourism is strong and is in rude health but, as Riddell Graham says, we cannot be complacent and we need to be mindful of the challenges that might be round the corner.

Recently, as a result of regulation and legislation, there have been a number of added costs from, for example, the national living wage, auto-enrolment and the apprenticeship levy. We already have a high VAT levy and air passenger duty makes Scotland an expensive destination. On top of that, the current exchange rate means that, although it has become cheaper for overseas visitors to come to Scotland, the cost of the produce that the industry buys is going up.

No one measure will solve all that, and we need to look at the whole basket of issues in the round. The STA is undertaking a piece of work to investigate whether costs are rising in the businesses across the sector or whether the evidence is just anecdotal. We suspect that businesses will have faced significant rising costs over the past five years, but we will have more information on that in October.

I echo and agree with Caroline Warburton and Riddell Graham’s points. I would add to the list of additional cost items business rates, which our members have identified as an issue and which is, of course, being looked at in detail. Costs in general will also be rising due to inflation, so the worry is that costs will continue to creep upwards.

One further matter, which I would say is a challenge rather than a cost, is the recent huge growth of peer-to-peer websites such as Airbnb, which, in effect, provide unregulated accommodation and undercut businesses that are paying taxes and complying with regulations. The fact that those businesses are being undercut by similar businesses that are being allowed to trade without having to comply with the regulations is an issue of unfairness and an area where a level playing field is required. As a result, we are happy that the Scottish Government is looking at the issue, and we would be happy to take part in any inquiries that are held, if that were deemed to be helpful.

On the first question about the numbers, I would say that the international figures present a real opportunity for us. In a survey of 2,000 customers that North Coast 500 Ltd carried out, 90 per cent came from the United Kingdom and 50 per cent from Scotland. The international market therefore presents a huge untapped opportunity, although I note that VisitScotland is targeting that well. That said, we know that the 50 per cent of people from Scotland who have been going around the north coast 500 and experiencing the north Highlands have had an awakening; they did not realise what was on their doorstep. That feeds into our whole socioeconomic and cultural confidence—we have something that is classed externally as world class.

As for the challenges, I have likened the situation to the goose that lays the golden egg. We have to be careful about sustainability, so we must not look only at the roads but at all the key infrastructure, including training for hospitality and the tourism sector. There needs to be infrastructure around where visitors can stop, with places to eat, viewing points and toilets, and we must also look at harbours. People focus on infrastructure as just being about fixing potholes, but we need to take a much wider look at it and include training and the upskilling of staff.

I represent the self-catering industry. VisitScotland figures show that 23 per cent of all visitors to Scotland stay in self-catering properties, so we are a good chunk of the market and we have traditionally done very well. According to a survey that we have just done on the volume and value of our sector, we are worth £723 million in spend to the Scottish economy, 3.4 million visitor bed nights and the equivalent to 15,000 jobs across Scotland. It is a major sector.

As far as the big tourism landscape goes, we are grateful that the Scottish Government has maintained VisitScotland’s budget. It does the big marketing for Scotland, and it is important that the budget is maintained. Also, it is good news that the themed years are continuing, because they focus everybody’s marketing in one place and point everyone in the right direction. We welcome that.

10:15

Our recent member survey shows that most members are buoyant and ambitious about this coming year. The figures are looking reasonably good, although we have a few concerns. We have touched on Airbnb and the sharing economy. We are very worried about regulations coming in that will impact on people who are not particularly involved in the sharing economy. It is a grey area. We have some traditional businesses that use Airbnb as one of their routes to market; Airbnb fills some of their bed nights but not all, and they still have a traditional route to market.

We are worried that the inquiry that is taking place from now until Christmas will impact heavily on our sector. How do you rein in a sector—the sharing economy—that is growing and growing? Should it be reined in? It is in the news today that Massachusetts is looking at imposing a 12 per cent tax on Airbnb-type properties. Berlin has banned short-term letting. There are worldwide concerns about the issue. We are a robust sector that is valuable to the Scottish economy and we are worried that we will be impacted by such legislation if it comes in.

To return to the figures, I presented the committee with a small background briefing that includes what I think is the most relevant stuff.

I do not disagree that there is growth. My sector has had nearly 16 per cent growth over the past three years, which is pretty good, given that we are a mature destination and a mature sector.

Edinburgh is growing exponentially, and that is worth taking into consideration. Edinburgh is probably 50 per cent ahead of the rest of the country. If you were to ask some of the leading operators, they would say that you almost just have to have a new flight coming in from Berlin, for example, and they can start to see their numbers grow. Although, according to our research, it is probably not causing any great displacement, the growth in Edinburgh means that Edinburgh is becoming like London.

I echo a lot of what has been said around the table by way of opening remarks—the tourism sector is buoyant. We are very fortunate that we have a strategy—the tourism Scotland 2020 strategy—and a national tourism organisation that is as far-sighted and innovative as VisitScotland.

However, the reality is that businesses are suffering. Turnovers are growing modestly or are static and margins are certainly being eroded. As others have alluded to, we are seeing significant increased costs. The devaluation of sterling has brought about increased costs for imported foodstuffs in our sector, for example, as well as for equipment and spare parts for equipment. Those increased costs may be short term because sterling may rise again—we shall wait and see. However, there are other, more fundamental costs that are impacting on businesses.

David Smythe alluded to business rates. In our view, there is a fundamental flaw in how hospitality and licensed businesses are rated. The system is arcane; it is not transparent. We hope that the Barclay review will do something permanent about it. The Scottish Government has listened to us and something temporary has been done, but if we do not have a permanent solution by April next year, we will find ourselves in the same position as in the spring of this year, when businesses—because of business rates revaluation—were extremely concerned about their ability to stay open, to meet their obligations to the banks and to continue to employ people. We have seen average increases in rateable values of about 75 per cent. Individual rateable values are increasing by between 10 and 259 per cent, and increases of 300, 400, and 500 per cent have not been uncommon in individual cases.

Something has to be done about the burden of business rates, but there are other costs. We regard tourism as being a devolved industry. Tourism and hospitality are well recognised and supported by the Scottish Government, and there are a lot of Scottish Government policies that support our sector. Nevertheless—I am not making a political point; I am making a statement of reality—some factors that affect our businesses are decided at Westminster, so we must ensure that, in the run-up to the general election, the BHA’s focus is on having evidence-based immigration targets, as our businesses in Scotland are dependent to a significant degree on continued free access to European Union labour. We also think that the national living wage must be depoliticised in the same way that the national minimum wage has been—in other words, we must give more power to the Low Pay Commission.

Scotland lies within the UK, and we are not a competitive country, as our rate of VAT on tourism is double that of our European competitors. We constantly hear local authorities and others calling for the imposition of a tourism tax on our visitors, which our businesses would have to collect and which would simply add to the price of the services that we deliver.

There must be some realism and we must not regard tourism as the golden goose that keeps delivering. The sector is buoyant, but there are pressures on our businesses and, if our businesses do not remain profitable, we will start to lose employment. In our sector, 35 per cent of our turnover goes on payroll and the first thing that managers look at if there is pressure on turnover or profit is the number of people they employ. Employment is vulnerable, reinvestment is vulnerable and businesses are vulnerable if they do not generate the right levels of profit.

Thank you. On that particular point, I note from the briefings that we have received that, although employment in the sector is rising, the accommodation and hospitality sector is the lowest paid of any major sector. Would you like to respond to that? You have raised cost issues, but low pay has been highlighted as an issue in the sector.

I do not think that that is altogether true. I do not think that our sector is generally low paid. Undeniably, there are entry-level and elementary jobs that are at the lower end of the pay scale, which are paid either the national living wage or the national minimum wage. However, I looked at the industry figures on demand for staff, and about 15 per cent of the demand is for entry-level or elementary jobs whereas about 38 per cent is demand for skilled jobs that are paid at much higher levels. There is also very rapid advancement for good people who show the right attitude and aptitude, and most responsible employers invest in upskilling and training their staff.

There is often a focus on our entry-level and elementary jobs, yet all our businesses employ all the normal skills and pay the market rates for the people who fill those jobs. We employ accountants, human relations specialists, managers, supervisors and marketing specialists. To suggest that ours is a low-paid sector overall is wrong.

Thanks for that. The statistics that I was citing are from the Office for National Statistics and were reproduced in the Scottish Parliament information centre briefing “Earnings in Scotland 2016”. The briefing states that the accommodation and food services sector has the lowest hourly rate of the six key growth sectors that have been identified by the Scottish Government. However, you have explained that—

I have a point that is not about statistics but about perception. Willie MacLeod articulated very well the fact that this is not just a low-skilled sector. There are great opportunities in it. A bit like retail, tourism is seen as a bit of a Cinderella industry—or it can be, when people focus on entry-level posts, like Willie said. It is seen as something that people do in their summer holidays, or before they go to university. There is the perception that it is not a sector in which there are career opportunities and the potential for growth.

In the past month, I spoke to someone from the University of the Highlands and Islands who said that the adventure tourism course was jam packed. If you put “golf”—or anything else—before the word “tourism”, the course will be jam packed, but if it is just the word “tourism”, there will be low uptake. That is because of a perception that the industry and the Government need to tackle. The sector is seen in the same way that retail is often seen: a low-entry sector that people work in before they go into their real job.

This is an issue that many of us have discussed for many years. We have a skills investment plan for tourism and we have a tourism skills group that is led by Robert Allan, who is the HR director of Apex Hotels, which has many industry and agency partners round the table. The attractiveness of tourism as a career is one of the four priorities that have been identified, along with the importance of management, leadership and enterprise skills to enable the many businesses that start off as lifestyle businesses to flourish and grow into being significant employers. There are many examples of that.

Tourism jobs are particularly important to the rural economy, and their importance is often overlooked. Tourism, together with food and drink, is the only key growth sector that is found in every local authority area. Therefore, its reach and its ability to provide employment in areas that are experiencing depopulation, for example, should not be understated.

We need to talk up tourism. It is correct that the range of jobs is considerable. I came through the adventure tourism side of things. We have skills gaps. We are looking for chefs, people with languages and people with digital marketing skills. It may be that people do not come to the sector through a traditional tourism course; they might do a different course and end up in tourism.

A slightly flippant comment to make is that we are helping people to enjoy their holidays. It is a great sector to work in. Everybody needs to talk up tourism, rather than talk it down.

There is a collective responsibility on all of us who are involved in tourism to talk up the industry and the opportunities that it provides.

If we come up against a cliff edge in the availability of EU labour, on which our industry depends throughout the UK—in Scotland, 18 per cent of the hospitality industry’s employees are from outside the UK, and the figure is much higher in some city businesses—and the freedom of movement of people for work reasons is in any way hindered, we will all have a responsibility to make our industry more attractive to the indigenous labour market. Indeed, we have submitted to the UK Government an analysis that KPMG has done for us of how we do that. We think that a 10-year strategy is needed to make our industry more attractive to the local labour market, people who are not currently economically active and the new generation of workers. That would have to be accompanied by some kind of transition period, if tourism in the UK generally and in Scotland is not going to suffer and if growth is not going to be hampered by a lack of employees.

Thank you very much. An interesting set of issues has come up in the opening comments.

I go back to the visitor surveys that Riddell Graham mentioned in relation to the visitor experience. We all want to and should celebrate the positive aspects of that, but it is part of our job as a committee to scrutinise the less encouraging aspects. Two things stood out for me in the findings. One was the finding that

“a gap exists between expectations and experience of the quality of food in Scotland, particularly for international visitors.”

The other was that

“Satisfaction with digital connectivity is lower than all other aspects of trip”.

I would be interested to hear views about where we are on both of those relatively difficult areas, what needs to be done to meet those challenges and how we are getting on with doing that.

I will respond on both areas, and I suspect that others will follow suit.

We obviously work very closely with Scotland Food & Drink on provenance and in our desire to promote the very best of Scottish produce. We have the taste our best scheme, which has been adopted by more than 1,200 businesses throughout the country, and we have strong links with other parts of the Scottish Government on that whole agenda.

There is a gap between expectations and experience, but it is quite interesting that the data shows that although a lot of people came with the perception that the food was not going to be very good, their experience turned out to be much better than expected. There has been significant improvement in that regard over the past three or four years.

You have picked up on the most interesting aspect of the visitor surveys, which relates to digital connectivity. Even in the visitor surveys that we did four or five years ago, it was never mentioned, but now it is the single most significant factor that visitors mention. Whether we are talking about the mobile signal, people’s inability to access wi-fi or their inability to use the piece of plastic in their hand, it is an extremely important issue. Although a huge number of Government initiatives are under way to improve the situation across the country, it would be folly for us to ignore that finding, because our information strategy is based almost entirely on people being able to access information when they want it, where they want it and how they want it. If people are struggling to get a signal in some way, that ability is significantly curtailed. You are right to highlight the issue. We are working with a number of bodies to improve the situation.

The other side of that is getting the industry to be smarter in its use of digital connectivity in day-to-day business operations. We think that businesses have a huge opportunity when it comes to being bookable online, encouraging user-generated content, improving their presence on the internet and working through digital tourism Scotland and our partners in the public and private sector.

We do a membership satisfaction survey every two years. In last year’s survey, one of the top three issues was lack of digital connectivity, so that feedback is coming from the industry as well as from visitors.

I heard something interesting on the radio last week. Someone in London said that they had problems getting a mobile signal in certain areas of London. It is a big issue. I know that the Government speaks to the big telecoms companies and so on, but it is certainly a problem. I endorse what Riddell Graham said.

We are working with Scotland Food & Drink. I feel passionately about purchasing local food and drink. We should be pushing at an open door but we are not, and I do not know why that is. The taste our best scheme is stuck where it was a year ago; we are not much further forward from the point of view of people buying into it or marketing it internally to the industry. I speak to Fiona Richmond at Scotland Food & Drink on a regular basis; it does not have any money for events to showcase our produce, although it has managed to get some funding from private sponsors for an event in Edinburgh next month.

We are a membership organisation and we are quite poor. We certainly do not have big money to put behind large-scale events to help at a local level—in Ayrshire, for example—to bring people along and find out what the local producers have. There is an issue about matching up small people with other small people, and that is what we are talking about.

On the gap in expectations, the north coast 500 has the reverse problem. Over the past 18 months to two years, the route has been ranked by National Geographic Traveller as the number 2 reason to travel out of 101 reasons to travel, and Condé Nast ranks it as the number 1 touring route in the world. People come with high expectations of us. The worry is whether the route lives up to the hype. It does—people are still saying that it is the number 1 touring route in the world—but we cannot become complacent about that.

My anecdotal evidence on food and drink as a key component of visitors’ experiences comes from bringing four American friends to do the north coast 500 last year. They were last north of Inverness in 2000, but it was a bit of a busman’s holiday for me. At the end of the eight-day trip, I asked them what the stand-out thing was for them and, unprompted by me, they said that it was the food. They said that the food that there was 16 years ago and the food that there is now are worlds apart.

We sometimes beat ourselves up about our offering and do not see what is in front of us. Four people is a very small sample—they are unreliable as well—but we are sometimes too close to things to see how good we are. There are some exceptional producers and suppliers in Scotland.

People do not have to be in the north Highlands for digital connectivity to be a challenge, but we need to consider the opportunities around the challenges.

It is great to hear that positivity. On the back of that, I have a question about the North Coast 500 Ltd model. There is a question about how we bring everything together—the food and drink, for example—and how we can meet the challenges together, whether on digital or on other infrastructure, such as roads. I know of several local community and business organisations, such as the Argyll and the Isles Tourism Co-operative and Visit Inverness Loch Ness. What is the North Coast 500 model, and are you aware of any other models that bring people together to develop local solutions to the challenges?

When we were looking at establishing the North Coast 500 model, I was of the view that it had to be different. Traditionally, destination management organisations—if that is what you want to call us—are publicly funded and the funding tends to be provided in short bursts before it dies away. It is a bit like fireworks in the sky: there is a burst of activity and everyone is hugely excited. Half a dozen projects are created and everyone thinks that they are fantastic, then they go because the funding has gone. We knew that the model had to be different.

For us, that was about monetising the brand. The way to make it sustainable was not to have our core costs publicly funded but to make it a private sector-invested model, and the key for us is how we monetise the brand. Professor John Lennon carried out our scoping study and proof of concept, and he said that the golden key that we needed to find was how to monetise the brand. In monetising the brand, we would create an income stream that would ensure longevity.

We have done a bit of work on destinations as a key strand of the tourism strategy. We use between 20 and 25 destination groups in Scotland, and every one of them is different. There is no one model that has worked successfully in Scotland. People may say that that means that the approach is not right. I think the opposite—it shows how innovative and creative the sector is in capitalising on the resources and the skills that are available in the destinations, which are all different.

I will cite two examples. One is the Argyll and Isles Tourism Co-operative, which you mentioned. That is a creative way of looking at the destinations. The destination groups all face financial sustainability issues; that is probably one of the key issues for them. We ask them to deliver a lot for very little, with often transitory resources. The Argyll and Isles Tourism Co-operative brought together the local tourism groups—or local tourism associations, as they are called—into a co-operative model. There are 11 members—there might be more now—and the co-operative has managed to secure significant funding from the local authority and Highlands and Islands Enterprise. It is doing creative marketing with Glasgow, and it has just done the wild about Argyll campaign, which has traction. It is all about collaboration and leadership—those are the two key aspects to the co-operative.

The other example is Visit Inverness Loch Ness. It is one of the few destination groups that gets a significant contribution from private sector funding. That is for the simple reason that it went down the business improvement district model, so businesses across the region pay a levy. It has a five-year business plan. It is coming towards the second half of the plan, so it will be looking for the plan and the model to be, if you will, re-elected. If businesses are being squeezed in other ways, such as by business rates and other costs, it might be that businesses decide not to vote for that model. It is a completely democratic process. Indeed, other destinations in Scotland have looked at and tried to adopt a similar model and the local industry has said that it is not for them.

No single model has been adopted throughout Scotland. I would welcome the opportunity for us to look at the situation in considerably more detail because, as I say, we rely on our destinations. Businesses put in millions of pounds-worth of in-kind time. In addition to trying to lead our destinations for us, they are running their own businesses.

I want to return to the theme that Kate Forbes picked up on. Clearly, the stats today are very positive. I consider, as I am sure that everyone else around the table does, that there is massive untapped potential throughout Scotland, even starting from the current good point.

There are national and local approaches, and we have heard good examples of the latter. I have two questions. On the one hand, we have the national approaches, which involve, for example, attracting events to Scotland. According to the Scottish Parliament information centre briefing that I have in front of me, the Scottish Government will devote up to £63 million on the 2018 European championships, and the paper refers to various other events that will receive substantial funding. On the other hand, we have the local approaches, and our local destination organisations in constituencies are scrambling around for £15,000 or £20,000 to do good work. In my constituency, we have the Moray and Speyside tourism initiative, which is doing really good work, but is struggling for funds. Will the witnesses comment on how we strike the national/local balance?

Secondly, to pick up on Tom Campbell’s partial answer to that question, I want to ask about the private sector. I will use my constituency as an example. For many years, we have struggled to engage the chief executives of the whisky companies, with some exceptions. Locally owned companies, such as Gordon & MacPhail, are very supportive of local initiatives, but with the likes of the Pernod Ricards and Diageos, it is, shall we say, much more challenging to try to engage their chief executives in promoting regional tourism. Yet what better advert for Speyside can there be than the hundreds of millions of bottles that have that word on them that are exported every year from Scotland? Will the witnesses comment on how we get the private sector on board to promote local initiatives?

We will try to make sure that it is a senior official that we engage with.

We are very aware that it is important to engage with the whisky industry in particular. I was in Islay a couple of weeks ago, working with the distilleries to enhance the whole collaborative approach through the distilleries working together. We want to encourage that because they have a huge international visitation, as you have already highlighted.

10:45

You make a really good point about the national and local aspects. Within VisitScotland, we have been looking at our whole approach to engaging with local organisations—destination groups, or whatever they might be called. Caroline Warburton has covered that point really well. It is not always about money; sometimes it is about identifying where they can make the biggest difference.

We engage collaboratively through our growth fund and a number of destinations throughout Scotland have tapped into that and have been hugely successful in their marketing. Their role is absolutely about bringing people together and businesses together and they do that really well on a collaborative basis. It is also about identifying where we can add value. Sometimes it is about the data, the information and the insights that we can bring to enhance their marketing.

I will give you a good example. We have been working over the past year with Fort William and Lochaber and the local tourism group there, to the extent that all the data on our website is now drawn through to theirs. They have saved a lot of money because they do not need to duplicate services. We are looking to enhance that project and apply it throughout the country where we provide a lot of the central marketing on behalf of local destinations. We are encouraging each destination to identify the rich content that they can provide us with, rather than spending a lot of money on duplication. A great example of that is North Coast 500—the company has worked closely with us on marketing to enhance the route.

You are right that more can be done. When we speak to destination organisations, we hear that finding a sustainable funding model is a real challenge. One of the challenges is a lack of large players in the tourism industry that are able to contribute financially throughout the country. That is something that Tom Campbell has managed to make work really well in North Coast 500 and we can learn from that.

We need to turn the situation completely on its head. We need to stop thinking about giving out £15,000 here and £20,000 there and asking corporates for what are, in effect, corporate social responsibility donations and doing good.

We are not talking a business language to corporates. They would find it much easier to listen to a language that says, “This will have a financial impact and longevity. Your contribution and involvement will mean that in five years, we will still have an impact, and in 10 years, we will continue to have an impact because we have created a model that will create financial sustainability.” We absolutely need to turn the situation on its head and to stop thinking about throwing £15,000 here and £15,000 there. In my opinion, that does not create sustainability. We raise expectations and then we just drop folk off the cliff again.

The business model for North Coast 500 has to be sustainable. We have to break even and make a profit. If we do not, we are out of a job. It is as hard and as brutal as that and that is how it has to be if North Coast 500 is going to be here in 10 years’ time. That is the business model that we have put together.

There is an invisible contribution from the private sector that is often unrecognised. Every single business that is involved in tourism in Scotland is investing in marketing its own business; it is investing in traditional marketing, in websites, and in reservation systems. All that activity is directly promoting Scotland and the destinations in which the businesses are located. It is very difficult to quantify that and put a figure on it, but every business that has a website that is promoting the business is also promoting the area and what the area has to offer. I do not think that we recognise that enough as a contribution that businesses are making.

I have been taking loads of notes throughout and I have quite a few questions—I might just fire them all off and see what everyone comes back with.

Richard Lochhead’s point about funding is vitally important. We have a lot of big events in my constituency, such as the Montrose music festival, which takes place next weekend—that is a little advert in case anybody wants to come along. The festival attracts international acts. I think that the Beach Boys are coming this year, and we had Bryan Adams last year. There is also the Harley-Davidson in the city motorcycle festival in Brechin, which is where I live, and the Stonehaven fireballs ceremony at new year.

Massive events are taking place and, as Richard Lochhead pointed out, large sums of money need to be invested in them. What kind of support can be given to such events for marketing, for example? I would be interested to hear whether VisitScotland waits for the people who organise those events to come to it. Are local authorities also involved? Another issue is that we struggle to have enough accommodation, particularly in Angus, for visitors who come for events.

We will also have the Victoria and Albert museum in Dundee. Its building is coming on and it will be a massive visitor attraction for the north-east of Scotland. However, the issue will then be about how we draw people out of that into Angus and other local authority areas around Dundee and how they will be able to reap the benefits of it.

With regard to agritourism, an organisation called Go Rural Ltd has been working with lots of businesses. The agritourism approach is linked with the promotion of Scottish food and drink because it is about people visiting a farm, learning about the food and getting the most local of experiences. Is that approach on the agenda of VisitScotland or being developed by it?

I think that it was Caroline Warburton who said earlier that tourism is of significantly higher and disproportionate importance to the economy of many rural and coastal communities. For example, in Aberdeenshire and the north-east, one of the key European markets is Germany and the area has increased connectivity with Frankfurt to develop those German connections. How will Brexit impact on that? We have already covered what Brexit will mean for migrant labour and how important that is. However, how do we keep going the kind of European connections that have been built up in the north-east?

Yes, thank you. I was going to echo the points that have been made a couple of times about the importance of rural and coastal tourism. Bed and breakfasts and guesthouses could help to capture the tourist pound and filter it into the often fragile economies of rural and coastal areas. B and Bs and guesthouses are often the only accommodation in rural areas and small villages. If there was a problem in getting enough accommodation for visitors to a large event in an area, some visitors could be dispersed to B and B and guesthouse accommodation. We are a fragmented sector, but our association might be able to help through liaising with planners of events and festivals about accommodation. I am sure that the self-catering people would say the same. We would all be happy to sit down with those who plan festivals and events to see how our members could help with accommodation.

I will try to answer some of Mairi Evans’s questions. We have a combined approach to events, as event organisers come to us for advice and we have a separate events directorate. We provide advice on best practice, how to run an event more successfully and sustainably, and how to market it. We often find that the organisers of small events are hugely passionate about the subject but maybe not so good at the marketing and promotion, so our role is to help in that regard. We also have an events fund, which is often linked to our themed years and provides funding to help promote events. On our main consumer-facing website—VisitScotland.com—we have a big section on events and we rely on our local event organisers to provide content for that.

The point about accommodation is a good one, as some big events—for example, the Open golf championship—put accommodation under a lot of pressure. I will dare to mention in the presence of David Smythe that Airbnb provides a particularly significant facility at the local level.

I often hear Airbnb being maligned but, actually, we need to learn from it, as it does an awful lot of good things. It has 16,000 hosts in Scotland and its marketing model is the envy of many, although I recognise that there is an issue around regulation. Airbnb is keen to work with event organisers, and it sponsored the Edinburgh fringe a couple of years ago. That is an opportunity.

The point about the V&A is a good one. We are looking at a different approach to measuring quality. We have identified Dundee as an example where we can look at quality and the whole visitor experience in the round. So we can think about how people get there and what that experience is like, and about what the accommodation is like. In addition to the attraction, we can consider what other things can be done in the area and not just in the city, and what the eating and drinking and retail facilities are like. We are looking at the experience in the round rather than in separate sections and trying to identify where we can do better. We firmly believe that the V&A will bring additional visitors who would never have come to Scotland, so we are thinking about how to enhance that experience and, as Mairi Evans says, spread it beyond the city. That is part of the overall strategy on which we are working with the local authorities in the area, and which is linked to the city deal.

I know Caroline Millar well, so I am very aware of Go Rural, as is David Smythe, because she is constantly bending our ears. I think that Richard Lochhead will know also about that from his previous ministerial role. She is hugely passionate, and rightly so, because agritourism is important to the economy of Scotland, particularly the rural parts, and she has argued the case really well. We recognise that and we have been working with her, particularly on marketing.

Mairi Evans also pointed to Brexit. I suspect that others will have a view on that, but we recognise that Germany is our second most important international market, and we want to grow that even further. Obviously, we are concerned about the potential negative impacts of Brexit.

I will be very brief. I want to quickly pick up on two points. On agritourism and Go Rural, we all know Caroline Millar very well. The good news is that Scotland Food & Drink is in the early stages of developing a food tourism programme as a result of the launch of its new strategy. That will be significant and the STA, VisitScotland and many other partners will be involved in it. With food tourism, on the issues of quality and links to agriculture as well as the expectation issue that has been raised, we will start to see the approach come together a bit more coherently over the next year, so watch this space on that. That is really good news.

On events, I have been to MoFest for the past three years—it is excellent and I thoroughly recommend it. The accommodation challenge is about using local businesses. From my knowledge of Angus, I do not think that there is an industry destination group for the area. Other areas have been effective at using such a network to move people away from the destination where the event is if accommodation is full. I encourage the local council and the industry to come together to consider whether there is some structure or network that would help to mitigate some of the bottlenecks, which probably occur only at certain times of the year.

I have a quick point on Brexit and rural funding. You guys on the committee deal with Europe, so you will know about the rural LEADER programme, which involves many projects in rural areas across Scotland, a good proportion of which are tourism projects. For instance, the new boats on Loch Tay are LEADER funded. We are worried that that funding will disappear when we leave Europe and will not be replaced. We need to keep an eye on that.

I am interested in the comments on sustainability and perhaps not relying only on themed initiatives for spin-offs, or even some of the EU funding. I am also interested in the local/national balance. To bring us full circle, challenges have also been mentioned, and business rates were mentioned as a key challenge. Willie MacLeod gave examples of how they are impinging on businesses’ sustainability. Given that the Barclay review group is due to report in July, will the witnesses say what can be done in the sector to improve the business rates system?

On the national/local issue, would it be welcome if, for example, local authorities had control of business rates and were able to retain the money from them? That would mean that, if tourism was a big industry and employer in a local authority’s area, the business rates system could reflect that. That is just one idea; I hope that members of the panel have others.

We have made several suggestions to Barclay, in writing and orally. One main suggestion, regardless of what else Barclay might say, concerns the fact that the assessor needs to sit down with the industry and its professional advisers and talk about the way in which our sector is approached. There are some lessons to be learned from the way in which the Valuation Office Agency deals with things in England and Wales.

On local authorities being responsible for and retaining business rates, we would probably have to see a much better worked-up proposition before we responded. The principal concern would be about inconsistency in rates and the creation of a less than competitive playing field across the country if different local authorities were applying different rates, although you could turn the suggestion on its head and say that it would make one area more competitive than another. That is why, as I said, we would need to consider the suggestion more carefully.

Our principal concern—in fact, we had a press inquiry about it just the other day—would involve the setting of poundage being based on local political preferences rather than on a national business or economic overview.

Inevitably, any increase in rates is seen as a tax. Businesses might not see a benefit from the tax but they definitely do not see a benefit from the increase. One of the challenges concerns the BID model. The tourism BID was mentioned in relation to Loch Ness. I think that increases in business rates pose a challenge to the BID model.

To combine the two issues, a fanciful idea might be to make the benefits of the increase visible to those who have to pay by taking a percentage of the increase and, in effect, putting it into something like a BID model. That would show that the tourism sector was getting a real benefit out of the increase.

I agree with Willie MacLeod. The approach probably needs to be brought up to date by means of a meeting with the Scottish assessors. Their methodology is completely robust, but it is probably a bit out of date. They set themselves up as being independent and transparent, but things are so transparent that the individual strands look like tangled spaghetti. Reading the practice notes about how a rateable value is arrived at is mind blowing.

In my sector, where there are historic buildings and various other kinds of buildings, arriving at a rateable value is very difficult, and the assessors cannot get their heads round it. We might be an example of what tourism is like in general, as we do not deal with big, high-rise office blocks that are owned by multinational companies, which assessors can measure and apply maths to easily. We need a proper, high-level meeting with the Scottish assessors to see whether there is another way to approach re-rating.

My sector is different from most others as we are a mix of private-sector bodies, public-sector bodies, charities, trusts and so on. As we know, charities and trusts do not pay business rates at all so, in effect, the private sector is almost cross-subsidising in those areas. Anyone who has an interest in education can apply for charitable status—although they do not always get it—so it is a very uneven playing field. Some of the maths probably relates back to practices that happened 50 years ago rather than today.

Our sector had one of the highest increases, with an average of 68 per cent. As for Willie MacLeod’s members, the increase was over 200 per cent for some businesses.

We have a good relationship with the assessors that we deal with and we know the spaghetti quite well but, even so, we did not get a good result that everybody could understand. The seven-year gap between the previous revaluation and this one was far too long. We think that Barclay should consider a three-year revaluation because, even after five years, it starts to get very historical. I do not think that the assessors would cope with a gap of less than three years.

Many of our members benefit from the small business bonus scheme, but what Government can give, Government can take away, so we have to put that to one side—[Laughter.] Well, we do.

It has been expanded, and we are grateful for that. However, Barclay might change that. He might say, “Right, instead of getting 100 per cent relief, you should get only 75 per cent”, or something similar. The landscape might change, and it is a political decision.

We are looking at rateable valuations in the round. We are grateful for the cap that the Government gave us—I think that it is 12.5 per cent plus inflation, which is helpful to some of our members who have suffered big increases. However, the cap is only until next year. A bit of hard talking needs to happen between now and then to establish what will happen for 2018-19, because we will be in the black hole again. Business costs will be compounded by Brexit and because wage increases are not meeting inflation, so a squeeze on people’s spending ability might come round to bite us by this time next year.

I echo what others have said. I hope that the Barclay review will take a step back and look widely at the whole issue. In particular, I hope that it will look at how we define a business in the new world of the sharing economy. Many of our members have one, two or three letting bedrooms in their own homes. Is that a business? When is something defined as a business? Why do they pay a tax when a competitor of the same size next door does not pay it?

This is about having a level playing field. It is about looking at where taxes start and how we treat very small businesses at the beginning of the chain. How can we define microbusinesses to encourage the sector and encourage the growth of tourism across the country?

I intend to ask about short-term lets. David Weston and David Smythe both got first comments in on the issue straight away, but they said slightly different things about it and about how we regulate the sector, which is growing massively. I think that it is estimated that there are already more than 6,000 short-term lets in Edinburgh, and they are essentially unregulated. What would you like to see come out of the move towards regulation?

We have been saying that there should be a level playing field and that similar-sized businesses or microbusinesses should comply with similar regulations. It is as simple as that. We are not asking for a whole lot of new regulations to be lumped on to Airbnb. That would not be right either, but it is not right that one business has to comply with a list of rules and regulations whereas, because it has chosen a different business model, a business of the same size next door in effect does not have to comply with anything.

Either there should be deregulation to take microbusinesses out of the regulations or the regulations that exist should be applied consistently to all businesses. We welcome competition and I think that everyone around the table from the industry would say the same thing. This is a very competitive industry and we all compete with one another. B and Bs compete with hotels, with self-catering and with other B and Bs. We are used to competition, but it must be fair. We must be able to compete on the same basis. That is all that we have been asking for.

We have issued a code of practice for city self-catering, which we have given to the councils in Edinburgh and Glasgow and to Airbnb, and it has been quite well received.

Like bed and breakfasts, we would like to see a level playing field. There are existing rules that can be enforced, such as fire regulations. Rather than coming in with great heavy boots, there is a lot to be said for seeing what we can already do.

At the end of the day, cities must find a balance. The concerns are about loss of residential amenity, housing stock being taken up by holiday use, and party flats, and there are ways of dealing with those things through existing legislation. We have to find a balance between the rights of residents, economic growth and tourism. If the inquiry can look at that sensibly rather than emotionally, we will be in a better place.

Following on from the point about the balance between the rights of residents and economic growth, I will pick up on a point that Eva McDiarmid made about the exponential growth in Edinburgh compared to the growth in other areas around the country. The most extreme example that I can think of is Barcelona, where the agenda is, in essence, about degrowth in tourism and reclaiming the city. The mood of the population there has shifted greatly and people feel that they have lost a lot. That is now the prevailing political wind. That is not a desirable place for us to get to. How do we ensure that tourists see Edinburgh as a staging destination that they arrive at and then travel on from, after spending a few days there, so that we spread that growth? How do we ensure that we get the balance right so that residents do not feel that they are being put upon and so that hostility towards the industry does not start to build?

Edinburgh is what it is. If you look at Scotland, you see that Edinburgh is the first destination that people search for. The Highlands are the second. We do not have a magic bullet to get everybody out of Edinburgh. The go rural initiative was about getting people out of Scotland’s cities. It had a 90-mile travel plan, I think. If there was a magic bullet, we would certainly use it, but Edinburgh is what it is: a world heritage destination.

On the regulatory point, none of us objects to any new form of competition coming along; Airbnb and the like are exactly that. However, there has to be a level playing field in the competitive environment, certainly with regard to the regulatory regime.

There are difficulties with the current regulations, in that different thresholds apply. There are different thresholds for planning, fire, compliance with environmental health, and business rates. If you start looking at the regulatory regime, you need to look at harmonisation of thresholds and better defining small accommodation businesses.

I will not be terribly popular for saying this, but the small business bonus scheme is paid for by businesses that pay the large business supplement. I would argue very strongly that a business with a rateable value of £56,000 a year is not a large business by any definition. We must look carefully at any business that benefits from whatever benefit we get from rates. There is an argument that every business should be paying something into the pot and should not be subsidised by larger businesses that are paying additional rates to meet the cost of the bonuses.

I will respond to Ross Greer’s point about Barcelona, which was well made. We led on the creation of a tourism development framework that identified areas of opportunity for investment. One challenge is that the issue is not so much the volume of visitors but the kind of visitor. There is a great example in Edinburgh: if you walk from one end of Princes Street to the other, you see that there has been a huge increase in the number of budget hotels. That is great—there are new bed spaces. I have nothing against budget hotels, but if we are positioning Edinburgh for the future, the question is whether the planners, when they make decisions, should identify opportunities to upscale the accommodation. There is a great example of that in Glasgow. We know that, about a month ago, a major conference did not come to Glasgow because there was insufficient high-end accommodation to accommodate the VIPs; there were not enough suites. There is loads of accommodation in Glasgow, but is it of the right kind?

In the phase leading on from our creation of the tourism development framework, we are trying to match supply and demand, but we want to have supply of the right nature and demand of the right nature. That is where the point about Barcelona comes in.

There are pockets such as Edinburgh, and we have had great growth in the north Highlands. However, Gareloch now has 100 fewer bed nights available than it did 10 years ago. The statistics on the depopulation of available accommodation show that we are way behind where we used to be. There are pockets where there will be concern, but there are other areas where there are significant opportunities for businesses to grow and for visitor numbers to increase. Last year, there were 29,000 new visitors to the Highlands, who put £9 million of additional visitor spend into the area, but there is still room for growth in the accommodation sector there.

I agree with what Riddell Graham said—the issue is to do with the type of accommodation that the planners give permission to build. A similar situation arose in Dublin 20 to 25 years ago, when Ireland was the Celtic tiger, and the city took in all the stag and hen parties that it could get hold of. Six or seven years into that, complaints from other guests, hotels and others led to Dublin looking at the situation again; hotels said that they would no longer go along with that approach.

I suggest that we are looking at a growth scenario. Right at the beginning of a period of growth, a destination will take in anybody, but I think that a very mature destination should be quite picky.

I have a supplementary on that. This is a familiar debate on Speyside. Although I am slightly critical of the whisky companies, which could do more, they play a crucial role in tourism through their visitor centres and by bringing in overseas visitors, sales teams and so on. The whisky companies often look for places to put up 40, 50 or 60 people at a time, and they have to use the hotels in Nairn and Aviemore rather than those in Speyside.

If there is a lack of top-quality hotel accommodation, how do we ensure that there is a joined-up approach involving the planners, the tourism bodies and entrepreneurs, and the companies that could build hotels and accommodation?

The tourism development framework was a major step forward in that respect, because it identified challenges and issues. All 32 local authorities, plus the two national parks, contributed to it, so there was buy-in to an extent that there had never been before. I was told before I kicked that off that if we got a dozen or so local authorities to support it, we would be doing very well. I am fairly competitive, and we got 32 local authorities to support it.

There is buy-in from local authorities. The bit that is missing is to do with supply and demand. To convince a private sector investor to come in, it is necessary to show that there is real demand that can be met and that it is worth their while investing. We work closely with Scottish Development International, which is the inward investment part of the Scottish Government. It is working with local authorities to make that bridge between investors and opportunities. It is up to the local authority to identify land and to make it easy for the planners to give their approval and the investors to come on board, but if we can identify real demand from hard data and bring that evidence to the table, that will make the biggest difference.

From where I sit, the approach is much more joined up than it was previously, although I think that we could do a wee bit more to enhance that.

I am afraid that we will have to draw matters to a close, because the Parliament is about to hold a plenary meeting and the committee cannot meet at the same time as that. You have covered a lot of ground on your priorities for the sector. If there are issues that you feel have not been covered that you would like to raise, you are at liberty to write to the committee. Thank you all for coming and giving us your evidence.